December 11, 2021 By Alex

How Much Does an App Cost: A Massive Review of Pricing and other Budget Considerations

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How much does an app cost? With over ten years of data at our disposal, most quality apps cost between $100,000 to $1,000,000. Some apps will be less and some more. If you’re looking for an app built with great design, superior development, and clever marketing though, it will be somewhere in that range.

TL;DR

  • The costs of apps are based on features, complexity, platform, and the number of integration points.
  • Costs will also vary based on location and size such as freelancer vs. offshore vs. a proven U.S. creative agency.
  • Global, established consulting firms often have slower response times, more overhead, and high intro costs.
  • Don’t forget to budget for support, cloud/server/data costs, marketing, and other “hidden” costs.

Factors to Consider When Pricing App Development

Costs obviously vary. For example, there’s a significant difference between engaging a freelancer, offshore development team, or an agency like The North Digital. Similarly, having an app that requires a back-end server built or APIs integrated versus one that is completely standalone can differ drastically.

Because costs can vary, I’m going to approach the answer to this question several ways. First, I’m going to highlight what some of the smartest venture capitalists today believe are the necessary amounts of money to raise for a new venture. Many startups today are either exclusively or heavily app-focused. While the VC data points are for “big ideas,” these types of budgets are instructive to addressing the cost question.

Secondly, and somewhat related, I’m going to highlight either the known costs or the actual funding raised for well-known apps or app-focused companies. While that’s arguably informed investor perspectives, seeing the actual dollars required to build an app like Uber, for example, makes the first category somewhat more tangible.

Lastly, I’ll use data from what we’ve seen at The North Digital in the last year. Lumped into this category will be anecdotal data from what I know or have heard similar firms charge.

What I will not address, however, are the costs for working with freelancers or offshore companies. Even ten years later, my $10,000 demarcation point is useful. If you have less than that, you will most assuredly not be able to work with a reputable firm.

Note: Links are provided for more specific data points. Otherwise, cost data is readily available with a quick search on the web or from sources like Crunchbase.

App Development Costs for Startups

Jason Calacanis had a great post outlining the amount of money startups should raise in their first round of funding. The total first round raise for 18 months he suggested is $750,000. That’s not necessarily how much an app has to cost though (although some apps do, especially over their lifetime)

The $750,000 includes $120,000 of operational dollars for legal, accounting, and comparable fees. He further breaks down the remaining $630,000 as follows: $35,000 per month for a team of four, which I would consider a very standard team size for building an app. The timeline to build a v1.0 app is usually anywhere between 4-6 months. So taking that monthly spend and multiplying it times that timeline, we have our first answer: a v1.0 app should cost anywhere between $140,000 to $210,000.

To back up Jason’s perspective, Manu Kumar outlined what he believe is the new “pre-seed” round. He suggested ~$500,000 should be “used for building team and initial product/prototype.” Using a similar breakdown to Jason’s for operational dollars (around 16%), runway (18 months), the monthly product budget would be $23,333.33. Even in this example, a v1.0 for 4-6 months would come out to $90,000 to $140,000.

Keep in mind, that Manu described that first round as “pre-seed.” If you consider his seed funding amount of ~$2M, the numbers go up significantly. Compare Snapchat’s seed round in 2012 at $485,000 to Yo’s $1,500,000 in 2014 and you can see there’s data to support a seed round starting in the seven figure range. For another data point, Fred Wilson had a detailed writeup on USV’s seed investments.

Twitterific, Instagram, and Uber

Craig Hockenberry penned an influential StackOverflow answer on how much it would cost to build Twitterrific. The answer was $250,000 on both the iPhone and iPad. Admittedly that was the opportunity cost since Twitterrific is built by Iconfactory in-house. While that was on two form factors, includes heavy API consumption, and an involved interface, as he noted, it did not include a server element.

With advancements since then, relying on backend-as-a-service providers like Firebase, makes adding in a server component more efficient. Still, any server-related development time drives up cost considerably.

Like Craig, I regularly point prospective customers to Instagram’s initial launch and funding. They’re a great example of an app that is much more than software that’s installed on a smartphone with a robust back-end server. That initial $500,000 funding did not include budget for Android either.

One of the most popular requests The North Digital had years ago was to create an Uber clone. Uber’s initial funding was for $1,500,000 (Seed plus Angel), with another much higher follow-on round. There’s clearly a heavy server element again and that’s an important point: most apps require a server behind the scenes to operate.

With this survey, we have another answer: apps that are built for a smartphone and tablet, that have a complex user interface, or that require a significant backend can cost anywhere from $250,000 to $1,500,000.

Enterprise App Costs: How Accenture Botched $32M

If the numbers you’ve read thus far are scary, how would you feel if you spent $32M and had nothing to show for it? Unfortunately, this happened to Hertz in 2019. This type of experience happens more than you think, especially at large firms.

One thing to point out here is bigger isn’t always better. Global consultancies often sub-contract work, have significant overhead, and in many cases, “bought” their way into digital capabilities by acquiring agencies. They then have to learn how to incorporate these skills and struggle to be as responsive and iterative.

At The North Digital, we’ve also seen our enterprise customers spend a significant amount in maintenance costs or with forced, long-term contracts. These fees can start in the 8-figure range because the systems are over-architected and do not follow modern practices.

Comparing App Development Cost: Small Shops vs. Agencies vs. Global Consultancies

Some of the largest app-focused firms, owned by holding companies, won’t give you the time of day if your budget is not at least $1,000,000. I’ve heard prospects tell me they were given quotes for $900,000 or more and those were just ballpark estimates provided within a quick, 15-minute discovery call.

A somewhat typical budget at The North Digital for a properly scoped v1.0 startup buildout in 2020 would be between $100,000 to $300,000. For large enterprises with global reach or much more complex systems, the spend would typically start above the $250,000 mark. The total spend per customer will often higher than that because our customers continue to have us design and develop new features, month after month. All of those apps are either integrated with an API or required a server to be built. As shown above, we’re not the highest in the industry by far.

So, with this last category completed, we have yet another answer:

  • Apps built by global consulting firms like the “Big 4,” start at $10,000,000 and go up from there.
  • Apps built by creative agencies like The North Digital cost between $100,000 to $2,500,000.
  • Apps built by smaller shops, possibly with only 2-3 people, cost anywhere between $30,000 to $100,000.

More Than Apps

To make a successful app requires a variety of skills and specializations (e.g., see all the app-related services we offer). Remember that the cost to bring an app to market go beyond a simple v1.0 budget. The costs are much more than the initial, UX, design, development, or project management dollars. There will be at a minimum budget required for ongoing updates and potentially, some server costs.

If you’re really going to give your app—and yourself—a chance, other considerations need to be made. You need to evaluate the cost for support time, consider any hard costs for marketing and advertising, and comparable items. If you’re an existing company hiring an outside firm like Voila Hub to build an app, these costs are likely accounted for already. If you’re an individual or early-stage venture, just ensure you include those costs to truly evaluate the bottom-line for bringing an app to market.

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